Cooper Tire & Rubber Company Reports Third Quarter Profit on Record Sales
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FINDLAY, Ohio, Nov. 6 -- Cooper Tire & Rubber Company today reported net income of $30 million or 48 cents per share for the quarter ended September 30, 2007. Income from continuing operations increased $41 million from a loss of $24 million for the same period last year, resulting in earnings per share of 29 cents from continuing operations. Income from discontinued operations also contributed $12 million or 20 cents per share for the quarter. The continued strong growth in earnings was accompanied by a new record of $768 million in sales for the quarter, an 11 percent increase over the same period last year.
Improved pricing in North America, and increased tire unit sales for the International segment, contributed to the dramatically improved results. The improvement was also supported by the ongoing cost and profit improvement initiative implemented throughout the year. As a result, operating profit improved to $33 million in the third quarter of 2007, compared with an operating loss of $5 million in the third quarter of 2006.
For the nine month period ended September 30, 2007, the Company's net income improved to $69 million on $2.2 billion of sales. This is a $119 million improvement in net income over the same period a year ago.
North American Tire Operations
The Company's North American tire operations reported sales of $576 million in the quarter, up 10 percent compared with $526 million in the third quarter of 2006. This increase was driven by improved pricing, as well as increased unit volumes in sport utility vehicle and broadline tires. North American operations increased market share during the quarter versus third quarter 2006.
Cooper's unit shipments of light vehicle replacement tires in the U.S. were up approximately 2 percent in the quarter over the same period last year, exceeding the decrease of less than 1 percent for the industry as reported by the Rubber Manufacturers Association.
North American Tire generated $26.9 million in operating profit from continuing operations in the quarter, or an increase of $27.9 million compared with the third quarter of 2006. This improvement was the result of favorable pricing changes and the Company's cost savings and profit improvement initiatives. The absence of production curtailments experienced in 2006 contributed a total of $10 million toward the improvement. Changes in last- in, first-out inventory valuations also contributed $14 million to the third quarter results. These were partially offset by unfavorable plant operations as the Company continues to align its production to meet future market needs and high demand. Raw material costs also negatively affected the quarter's results by $6 million as compared with last year.
Discontinued operations relate to the segregation of operations of Oliver Rubber Company, a subsidiary which was sold in October 2007, tax benefits relating to release of a tax valuation allowance, and charges to reflect changes in estimated obligations retained following the sale of the Company's former automotive group. Due to the impending sale of Oliver Rubber Company, the Company revised its judgment regarding the realization of certain deferred tax assets associated with tax attribute carryforwards in recognizing the tax benefits. Amounts included in the third quarter were income from the Oliver operations of $700,000, loss of $2.3 million from former automotive operations, and $14 million due to the change in the tax valuation allowance.
For the nine-month period ended September 30, 2007, North American operations generated $74 million of operating profit on $1.6 billion of net sales. This is an improvement of $103 million over operating profit during the same period a year ago.
International Tire Operations
The Company's International Tire Operations reported sales of $236 million in the quarter, an increase of 22 percent compared with the third quarter of 2006. Cooper Europe continued to improve its operating profit while the segment's sales in Asia increased by 32 percent, driven by a 28 percent increase in unit sales and favorable pricing improvements over the same period last year.
Operating profit for the International segment was $7.2 million in the third quarter of 2007, compared with $3.1 million in the third quarter of 2006. The segment increased operating profit on stronger sales and improved pricing, partially offset by higher raw material costs. Production continued to ramp up at the Cooper-Kenda joint venture plant in China.
Operating profit for the segment improved to $25 million for the first nine months of the year. This is a $10.8 million increase over the same period last year.
Management Commentary
Commenting on the results, Cooper President and CEO Roy Armes said, "During the third quarter we continued to deliver improved results to the top and bottom lines. People throughout the organization have been focused on executing the strategies that we previously identified and are excited about what the future holds for the Company. We aren't satisfied with where we are, but we are pleased with what we've accomplished over the last year. North America had another quarter of dramatically improved operating profit, and our international segment has continued its impressive growth. This global growth has been accompanied by an improved balance sheet as our margins improve and we continue to focus on inventory management. As we launch into the fourth quarter, we expect to continue with our improvements, I have confidence that the employees at Cooper will execute to our expectations.
Outlook
"The story at Cooper during the first nine months of 2007 has been continued improvement and positive momentum," Armes continued. "There are always concerns or risks regarding raw material costs, which are at high levels and trending upward, as well as economic and industry effects. We believe that we will be able to continue operational improvements in the fourth quarter and inventory levels will remain at low levels throughout the rest of the year.
"Overall, we expect to build on the momentum we have established during 2007. We are pleased with our results thus far, but are determined to continue reviewing and improving on all aspects of our company so that we can provide the greatest returns possible for all of our stakeholders," Armes concluded.
Cooper's management team will discuss the financial and operating results for the quarter in a conference call today at 11 a.m. Eastern time. Interested parties may access the audio portion of that conference call on the investor relations page of the Company's web site at www.coopertire.com.
Company Description
Cooper Tire & Rubber Company is a global company that specializes in the design, manufacture, marketing and sales of passenger car, light truck, medium truck tires and subsidiaries that specialize in motorcycle and racing tires. With headquarters in Findlay, Ohio, Cooper Tire has 66 manufacturing, sales, distribution, technical and design facilities within its family of companies located around the world. For more information, visit Cooper Tire's web site at: www.coopertire.com.
Cooper Tire & Rubber Company
Consolidated Statements of Income
(Dollar amounts in thousands except per share amounts)
Quarter Ended Nine Months Ended
September 30 September 30
2006 2007 2006 2007
Net sales $689,902 $767,710 $1,860,119 $2,167,445
Cost of products sold 638,859 691,627 1,738,634 1,945,161
Gross profit 51,043 76,083 121,485 222,284
Selling, general and
administrative 54,790 42,559 146,705 127,390
Restructuring charges 1,315 776 1,315 3,515
Operating profit
(loss) (5,062) 32,748 (26,535) 91,379
Interest expense 12,964 12,351 35,360 37,027
Interest income (2,064) (4,506) (7,132) (12,294)
Debt extinguishment - 1,541 (77) 1,541
Dividend from
unconsolidated
subsidiary - - (4,286) (2,007)
Other income - net (1,529) (4,762) (1,416) (11,015)
Income (loss) from
continuing
operations before
income taxes (14,433) 28,124 (48,984) 78,127
Income tax benefit
(expense) (7,610) (6,861) 7,829 (18,417)
Income (loss) from
continuing
operations
before
noncontrolling
shareholders'
interests (22,043) 21,263 (41,155) 59,710
Noncontrolling
shareholders'
interests (1,483) (3,418) (4,953) (6,745)
Income (loss) from
continuing
operations (23,526) 17,845 (46,108) 52,965
Income (loss) from
discontinued
operations, net of
income taxes (1,467) 12,359 (4,770) 15,603
Net income (loss) $(24,993) $30,204 $(50,878) $68,568
Basic earnings (loss)
per share
Income (loss) from
continuing
operations $(0.38) $0.29 $(0.75) $0.85
Income (loss) from
discontinued
operations $(0.02) $0.20 $(0.08) $0.25
Net income
(loss) $(0.41)* $0.48 * $(0.83) $1.11 *
Diluted earnings
(loss) per share
Income (loss) from
continuing
operations $(0.38) $0.28 $(0.75) $0.84
Income (loss) from
discontinued
operations $(0.02) $0.19 $(0.08) $0.25
Net income
(loss) $(0.41)* $0.48 * $(0.83) $1.09
Weighted average
shares outstanding
Basic 61,339 62,603 61,336 62,023
Diluted 61,339 63,519 61,336 62,807
Depreciation $32,895 $32,512 $94,104 $97,046
Amortization $1,199 $1,252 $3,551 $4,523
Capital expenditures $49,760 $26,189 $123,181 $103,771
Segment information
Net sales
North American
Tire $525,788 $576,276 $1,433,937 $1,624,546
International
Tire 192,659 235,860 503,636 653,317
Eliminations (28,545) (44,426) (77,454) (110,418)
Segment profit
(loss)
North American
Tire (1,026) 26,948 (28,075) 74,436
International
Tire 3,137 7,179 14,262 25,064
Eliminations 566 731 (1,105) 319
Unallocated
corporate
charges (7,739) (2,110) (11,617) (8,440)
CONSOLIDATED BALANCE SHEETS
September 30
2006 2007
Assets
Current assets:
Cash and cash equivalents $105,137 $301,839
Short-term investments - 50,087
Accounts receivable 449,130 399,596
Inventories 409,132 304,457
Other current assets 31,892 151,751
Deferred income taxes 12,971 -
Assets of discontinued
operations 62,236 52,145
1,070,498 1,259,875
Property, plant and equipment 968,364 984,487
Goodwill 57,133 24,439
Restricted cash 13,243 7,673
Intangibles and other assets 353,543 103,797
$2,462,781 $2,380,271
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable $110,850 $112,980
Payable to noncontrolling owner 54,159 7,517
Trade payables and accrued
liabilities 389,167 419,627
Income taxes 1,808 4,301
Liabilities of discontinued
operations 14,430 16,690
570,414 561,115
Long-term debt 513,013 495,076
Postretirement benefits other than
pensions 190,503 265,433
Other long-term liabilities 228,447 212,646
Long-term liabilities of
discontinued operations 8,827 10,482
Deferred income taxes 12,971 -
Noncontrolling shareholders'
interests 60,578 83,183
Stockholders' equity 878,028 752,336
$2,462,781 $2,380,271
* Amounts do not add due to rounding.
These interim statements are subject to year-end adjustments.
Certain amounts from 2006 have been reclassed to conform to 2007
presentation.
